The IRS has announced a revision to Form 14457, Voluntary Disclosure Practice Preclearance Request and Application. This form allows taxpayers who may face criminal prosecution for willful violation of the tax law to voluntarily disclose information to the IRS that they failed to previously disclose.

 

According to Accounting Today, the 2019 version of the form had a checkbox for reporting virtual currency issues, but the IRS has now made several updates and additions to the form, including an expanded section for reporting virtual currency.

 

"This is an important form and process for people who recognize it's better to step forward and address their tax situations head-on, before facing IRS enforcement action," said Doug O'Donnell, deputy commissioner for services and enforcement. "The revised form includes a number of updates, and we encourage people to review the guidelines and consult a trusted tax professional."

 

According to the IRS, thousands of taxpayers have used the Voluntary Disclosure Practice since its inception. It serves as a compliance option for taxpayers who have potential criminal exposure and wish to come into compliance with the tax laws. Those making such disclosure are still subject to civil examination and the payment of all applicable taxes, interest and penalties.

Taxpayers who did not commit any tax or tax-related crimes and wish to correct mistakes or file delinquent returns should consider other options available to comply with their tax and reporting obligations. The IRS encourages them to consult with professional tax or legal advisers in determining which option is the most appropriate.

A taxpayer's voluntary disclosure must be timely, accurate and complete. The taxpayer must also cooperate with the IRS in determining the correct tax liability, and make full payment of the tax, interest and any applicable penalties.

Cooperation includes full payment of all tax, interest and penalties. A taxpayer who is unable to make full payment may request that the IRS consider other payment arrangements. Taxpayers who anticipate that they cannot pay the total amount of tax, interest and penalties required must disclose this and submit a proposed payment arrangement and a completed, and executed, Collection Information Statement (Form 433-A). The burden is on the taxpayer to establish inability to pay, to the satisfaction of the IRS, based on full disclosure of all assets and income, domestic and foreign, under the taxpayer's control.

In addition to the expanded section for reporting virtual currency, updates and additions to Form 14457 include the following: